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China’s banking regulator has declared its intention to tackle the country’s £2 trillion “shadow banking” sector in response to alarm at the tide of unregulated debt threatening to overpower its financial system.

Stock markets in China fell by their most in nearly a month, with the Shanghai Composite losing 2.8 per cent, after Beijing ordered a clampdown on financial products that even government officials have likened to a Ponzi scheme.

Shares in some Chinese banks fell by 9 per cent after the announcement of rules limiting their ability to invest in so-called wealth management products, an opaque array of under-regulated